Implications of the USMCA of November 2018 in the automotive industry installed in Mexico.

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Gerpisa colloquium, Paris (2019)

Abstract:

The signing of the USMCA and the triumph of Andrés Manuel LópezObrador, as President of Mexico, both, can have profound implications for the near and distant future of the automotive industry in Mexico.
As has been widely spread by President Trump's "tweets" that the USMCAhas achieved greater advantages for the United States, those it had lost with NAFTA. We have refuted these assertions with data that we presented in the 26th Colloquium last year in which, in a fair analysis, it is not Mexico that benefits extensively from the production and exports of the automotive industry, but the assembly plants and factories of auto parts installed in Mexico, which are mostly foreign. We think that what is really happening is a commercial war between automobile and autoparts American factories, vs. Japanese, German, Korean and Chinese factories.
In this article, it shows how the production and export of vehicles and parts manufactured in Mexico, not only has not decreased, but has increased in the two years that Trump has as president of the USA, because companies have defended their comparative and competitive advantages to produce in Mexico. Now, with the signature of theUSMCA, which, incidentally, has yet to be ratified by the Congresses of the three signatory countries of the Treaty, we find that the changes that were included have a really small impact for the factories installed in Mexico. These are reduced to:
1) The parts manufactured in the region for light vehicles have to have a content of 75 percent (previously it was 62.5) by 2023, in 2020 it will be 66 percent and 69 in 2021. However, if not Content is achieved, a 2.5 percent tariff will be paid. The companies installed in Mexico are studying the way to solve this point and they are optimistic about it.
2) Of the other vehicles, they have to study in detail each type of them to know what fraction comes in and be able to meet the requirements that are salvageable.
3) Mexico will be exempt from tariff measures on 2 million 600 thousand vehicles per year and auto parts up to 108 billion dollars per year.
4) The three countries establish that they will work with the rules of the International Labor Organization with respect to the worker-company relationship.